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In this category, you will find more information about subjects related to investments.
To invest is to allocate resources into something and expecting it to be beneficial in the future. In financial investment, that benefit is known as a return. Investment always carry risk, since we can not forsee the future. As an investor, it is therefore a good idea to employ techniques to mitigate this, e.g. diversification.
One of the earliest known legal frameworks for investments is the famous Code of Hammurabi, a Babylonian code of law created in ancient Mesopotamia around the year 1754 BC. Among other things, this code established means to legally punish someone who didn’t uphold their financial obligations, and it also created rules for the pledging of land as collateral for a loan.
In the 20th century, the financial markets rose to unprecedented heights, and terms such as stocks, shares, bonds, stock options, and weather derivatives became household words. By the mid-1900s, a trend could be seen where investments considered lower risk were still called investments, while high-risk investments – especially if they were also intended to be short-term – were refered to as speculation.
Today, two of the largest financial markets in the world in terms of trading volume are the foreign exchange market (also known as the currency market or FX market) and the credit market.
The foreign exchange market is a global decentralized and over-the-counter (OTC) market that includes various aspects of buying, selling and exchanging currencies. The main participants are the larger international banks, and financial centres existing in various locations around the world function as major nodes in the network. Currencies are traded in pairs, where the market price of one currency is expressed in relation to another. The most frequently traded pairs are EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD, and NZD/USD.
The global credit market in aggregate is about three times the size of the global equity market. An important aspect of the credit market is the bond market, where participants can issue new debt on the primary market and buy and sell debt on the secondary market. Through the bond market, long-term funding of both public and private expenditures can be obtained. Many governements issue bonds to get access to cash, which has created a government bond market of immense size and with a high level of liquidity.